Peter Townsend at the Christchurch Town Hall.
We are starting to see the ramp up of the rebuild in Christchurch really beginning to take effect. The total damage in Christchurch is estimated to be $40 billion. However, that does not take into account cost escalation and betterment. Of that $40 billon, around $20 billion relates to housing damage and most homeowners as they repair or rebuild their houses are putting significant betterment into their properties.
For example significant repair of the core of the house usually results in a new kitchen or bathroom over and above the damage incurred. Factoring in cost escalation and betterment probably means we are heading towards a $50 billion spend in the rebuild of our city.
It is a bit like tipping three years of Fonterra's total export earnings into a population of less than 500,000. That has never happened before in New Zealand. It is probably understating it to call it the biggest ever economic development programme the country has ever seen.
After three and a half years we are about 8-10 per cent into the rebuild. In our central city there are still a few buildings to come down, meaning that a total of 1100 commercial buildings will have been lost. Outside of the central city we have 400 commercial buildings destroyed. The key projects being attended to in the central city will cost billions of dollars and the rebuild of commercial buildings is estimated to be $10 billion.
In the core of our central city approximately 80 per cent of the commercial buildings have been destroyed. That means as we recreate central Christchurch we are going somewhere new; we are not going back to where we came from. The city is going to look different; exciting, eclectic and open.
The rebuild of Christchurch, however, will be led by housing repairs and rebuilds.
Already there are over 8000 homes with an excess of $100,000 worth of damage that have been cash settled. The homeowners now have their settlements and want to get on with rebuilding. Of the 80,000 with under $100,000 worth of damage about 55,000 have now been completed at a total cost of approx $1.5 billion. We have just under 10,000 houses that have been destroyed altogether and will have to be rebuilt from scratch. When that is combined with the numbers of people we expect to come into our city to assist us with the rebuild a housing shortage is locked into our medium term future.
Unemployment in Christchurch is now at 3.4 per cent compared to the national average of 6 per cent. Our region has GDP growth of over 6 per cent and that is expected to increase as the rebuild ramps up. 2014 will be the year that we start to see resource constraints kicking in, in the context of human capital, materials and financial capital.
The business community of greater Christchurch is in good shape. It is an urban myth that we have lost a lot of businesses in a post-earthquake environment. It is simply untrue; however the scale of the rebuild is beyond the capacity of local businesses to accommodate. We will need increased support from companies outside of Christchurch.
It is clear that we are working our way through the cascading constraints of construction. The first constraint was insurance, but with 45 per cent of house insurance now settled and nearly 80 per cent of commercial insurance claims agreed to, there is a wave of capital flowing into our economy.
The housing rebuild is expected to ramp up exponentially at the end of the first quarter of 2014 and with 25,000 having over $100,000 worth of damage and thousands of homes to be rebuilt from scratch, the opportunities are enormous. It is expected that the rebuild of commercial buildings will lag behind the housing rebuild by at least two years (apart from some streets in Christchurch which are already subject to serious commercial rebuild).
All of this means companies outside of Christchurch have the opportunity to make a significant contribution. From experience to date it is those companies that form collaborative relationships that make the most progress in the shortest time. Companies inside Christchurch have the ability to unlock economic opportunities and companies outside can assist those companies to build scale.
This is just starting to happen.
We should also remember the importance of our regional economy and particularly the role that the sustainable harvesting and farming of water will play in Canterbury. Canterbury has 70 per cent of New Zealand's irrigated land and with major schemes now in the pipeline that will increase by 100,000 hectares. This provides enormous opportunity, both in the projects themselves and in the subsequent increased wealth, that will be generated from the region in Canterbury. For the city and the region it is all about the sensible application of technology to our rebuild and to our natural capital.
We are tracking to a safe, modern, recreated central city supported by an urban rebuild, and an already robust but rapidly expanding regional economy. The rebuild is underpinned largely by private insurance with material support from Central and Local Government in the key projects in the precincts within the central city. There is an absolute determination to make New Zealand's second largest city one of Australasia's best.
• Building numbers 3.5 years on, Christchurch is about 8-10 per cent into the rebuild process 1100 commercial buildings will have been lost $10b estimate for rebuild of commercial buildings.
Peter Townsend is Chief Executive of the Canterbury Employers' Chamber of Commerce.
